The Integration of Insurance and Taxes in Corporate Pension Strategy

ABSTRACT

This paper examines the implications of the joint effects of insurance and taxes for the optimal corporate pension strategy.
It is shown that neither the “mini‐max” nor the “maxi‐min” strategy advocated by previous authors is necessarily best in corporate
pension management. In the presence of capital market imperfections, the analysis via a single‐period contingent‐claims model
indicates that optimal corporate pension strategy in both asset‐allocation and funding decisions can be a noncorner interior
solution.